Asian stocks retreat as investors keep eye on US

CAUTIOUS Although traders in Seoul and Mumbai had some thrills, regional markets ended the week on a quiet note as investors monitored the effects of Hurricane Rita

AFP , HONG KONG

Asian stocks closed lower on Friday in cautious trade as investors kept an eye on Hurricane Rita's progress toward Texas and the major US oil and gas facilities there, fearful of a repeat of the devastation caused by Hurricane Katrina just weeks ago, dealers said.

There was some hope that Rita, which was downgraded to category four from five, might not prove as destructive as first feared but it remained a massive storm, posing risks to the US oil industry and possibly the wider economy.

On that basis and ahead of the weekend, there was no reason for any aggressive trade whilst Tokyo's closure for a public holiday also made for quiet business overall.

Losses were modest except in Seoul, which was down 2.01 percent to erase all the week's gains as foreign investors took their profits on the run up to the historic 1,200 points level.

Mumbai had another roller-coaster day, finishing flat after another bout of nerves sparked early losses.

Taiwanese share prices lost 0.78 percent to their lowest level in nearly four months as concerns over possible foreign investor sales more than offset a firmer Wall Street performance overnight.

Dealers said there was also some pressure coming from margin calls, made when investors who have borrowed money to buy stocks are forced to repay some of the funds as the market falls.

"Foreign investors apparently continued selling on the local bourse today, leading the benchmark index to sink further when there were mounting fears of margin calls," said Tom Tang (湯建源), president at Kai Yuan Securities Investment Consultant Co (開元投顧).

Large-cap stocks were driven lower by foreign investors' sell orders, while some high-priced stocks came under profit-taking pressure.

The TAIEX closed down 46.52 points at 5,925.54, the lowest level since May 25, when it hit 5,888.53 points on turnover of NT$68.61 billion (US$2.07 billion).

"The broad market was marred by weak confidence and its picture in the near term will be dictated by developments in the major foreign markets, the movement of oil prices and currency prospects," Tang said.

AU Optronics Corp (友達光電) closed down NT$0.80 at NT$40.50 following a 4.97 percent fall in its American Depositary Shares.

Evergreen Marine Corp (長榮海運) shed NT$0.80 to NT$21.00 and EVA Airways Corp (長榮航空) lost NT$0.30 to NT$12.60 after a report that the Evergreen group is bracing for worst-case economic scenarios with oil prices continuing to move higher.

Seoul share prices closed 2.01 percent lower, giving back all the gains made this week, with foreign investors unloading most blue chips to take profits. Dealers said Wall Street's overnight rebound on a Hurricane Rita downgrade did little to limit the steep fall as many investors felt that the market had risen too rapidly to touch 1,200 points. The KOSPI index closed down 24.09 points at 1,175.88 in subdued trading.

"It's just a technical correction, with people just needing a cooling period to attempt psychological resistance at 1,200 points," Woori Investment Securities analyst Hwang Chang-Joong said.

Hong Kong share prices closed off their lows as property stocks rebounded in late trade on hopes that next week's government land auction will fetch high prices and trigger a rally in the sector.